Will Vermont show the way on health care?

Health care reformers now look to the state of Vermont rather than the federal government to lead the way on the way to a universal public health insurance system.

Vermont Gov. Peter Shumlin in May signed into law a bill which commits the state of Vermont to set up a publicly-funded, publicly-administered health insurance system that would cover all 622,000 residents of the state.

More than 5 percent of Vermonters are without health insurance, and another 15 percent are considered under-insured. Health care costs in Vermont are rising at the rate of 9 percent a year, twice the rate of the state’s economic growth. Shumlin and other reformers say the new plan will give everyone the coverage they need, and at less cost than the present system.

Under the law, a five-member board will be appointed in October to set up a plan called Green Mountain Care. The first step will be for Vermont to set up a health insurance exchange to provide a simplified health insurance marketplace as called for under the federal Affordable Care Act. Starting in 2014, the public would have a choice between the new Green Mountain Care system and at least one private system. The goal is to go to a single-payer system by 2017.

There are a lot of things yet to be worked out – in particular, how to pay for the system, and how much health care providers will be paid. The original idea was a payroll tax variously estimated at 12.5 percent or 14 percent, most of it, in theory, paid by the employer. This is a lot! While many people pay an even higher percentage of their incomes for private health insurance, that is still a lot of money.

The board’s mandate is to set up a system that will (1) not have a negative effect on Vermont’s economy, (2) have a sustainable system of financing, (3) cost less to administer than the present system, (4) reduce the rate of growth in per-person health care spending, and (5) reimburse health care providers at a sufficient rate that doctors, nurses and other health care workers will not leave the state.

Vermont’s health care reformers think that it actually is feasible to provide better health care at less cost. One way to do this is by means of preventive care – helping people to stay healthy so they won’t need a lot of medical treatments. Under the new law, the board will look into capitation, a system of paying health care providers a set amount per patient rather than fee for each service provided. Under a fee-for-service system, the financial incentive is to maximize visits to clinics and doctor’s offices; under a capitation system, the incentive is to minimize the need for visits.

Another way health care costs would be kept down is that a public system would not have to pay actuaries to determine the individual risk and premium level for each person, nor set aside an amount as profit for the owners.

You might wonder whether this is realistic. In fact, a number of foreign countries provide more extensive health insurance coverage than in the United States and at less cost through just these methods.

I think Vermont’s leaders are wise to move slowly and deliberately, but this does give the health insurance industry and other opponents of a public system time to mobilize support for repeal of the law or changes that would undermine its purpose. Republicans in Vermont are unanimously opposed to Green Mountain Care.

Maybe it is better to pioneer in a single state than to try to implement a new system on a national basis. This is the benefit of a federal system, which allows the separate states to experiment with reform. If a single-payer system or a public option can be shown to work in a single state, other states and the federal government will have a successful model on which to base their own reforms. If I am wrong and it doesn’t work, it is better to find out in Vermont before trying it in the United States as a whole.

Click on Vermont Guide to Health Care Law for a guide to the new law produced jointly by the Vermont Medical Society, Vermont Bar Association, Vermont Association of Hospitals and Health Systems, University of Vermont College of Medicine and Vermont Law School.